Policy Paper

November 2018

Reconciling core state power integration with market regulation? The potential of the

Macron-Rutte alliance

Łukasz A. Janulewicz and Robert Stüwe

No.15

Reconciling core state power integration with market regulation?

EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 2

Center for European Neighborhood Studies

The Center for European Neighborhood Studies (CENS) is an

independent research center of the Central European University (CEU) located in Budapest, Hungary. Its main goal is to contribute to an informed international dialogue about the future of the European Union

in the world, while capitalizing on its Central European perspective and regional embeddedness. The strategic focus of the center is academic and policy-oriented research

on the place and role of the European Union in its rapidly changing and increasingly volatile neighborhood. Through its research, CENS seeks to

contribute to the understanding of the environment where the EU, its member states and partners need to (co)operate, and it aims at supporting the constructive development of these relations by providing

opportunities for discussion and exchange. The center’s geographic focus areas are Central and Eastern Europe, the Western Balkans and Turkey,

Eastern Europe, the South Caucasus and Russia.

EU Frontiers

The ‘EU Frontiers’ publication series aims to provide an account of actors and developments along the enlargement frontiers of Europe. It fills an

academic gap by monitoring and analysing EU related policies of the broad Central – and Eastern European region, studying the past and

evaluating the prospects of the future. Furthermore, it follows and gives regular account of the EU Enlargement process both from an inside and an applicant perspective.

The opinions expressed in this report are those of the authors and do not necessarily reflect those of CENS or their home institutions.

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About the authors

Łukasz A. Janulewicz (Central European University) Łukasz is a Research Fellow at the Center for European Neighborhood Studies (CENS) at Central European University in Budapest. He is also affiliated as a Research Fellow with the Global Europe Centre at the University of Kent. His research focusses on regional cooperation in Central and Eastern Europe, particularly the Visegrad Group and the Three Seas Initiative, within the broader context of European integration. His further research interests include Polish foreign policy and Poland’s foreign aid program, as well as the provision

of technical assistance and capacity building as instances of policy transfer. His current research investigates the foreign policy responses of the Visegrad countries to the refugee crisis, particularly their use of foreign aid in the Middle East. He received his PhD from the University of Kent with a thesis on the Polish foreign aid program and holds a Magister degree in Political Science from the Ludwig-Maximilians University in Munich. Previously to joining CENS, he worked as a Sessional Lecturer at Canterbury Christ Church University and as an Associate and Assistant Lecturer at the University of Kent teaching courses on European integration, European foreign and security policy and European political economy. Before entering academia, he worked as a parliamentary researcher on European affairs for a Member of the Bavarian Landtag. Robert Stüwe (University of Bonn) Robert is a Research Fellow at the Center for European Integration Studies (ZEI) at the University of Bonn. For the duration of Fall Term 2018, he resides as a Research Affiliate at CENS. He is currently writing his doctoral thesis about the EU's integrative power in its external energy relations with a special focus on the role of the Central Eastern European States at the University of Bonn. At ZEI, he is coordinating a research project on "Governance and Regulation in the EU". His further research interests include theories of European Integration and International Relations. He has been teaching on the impact of the EU's eastward enlargement on conflict prevention. Previously, he has worked as a Research Assistant in Brussels for the Bertelsmann Foundation in 2014/15 and has been a GIZ Fellowship Intern at the Friedrich-Naumann for Freedom in Washington D.C. in 2012. He earned a Master of European Studies (MES) in EU Law / Politics and a bachelor’s degree in Political Science at the University of Bonn.

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Reconciling core state power integration with market regulation? The potential of the Macron-Rutte alliance

Introduction

In early October 2018 news broke about the formation of a ‘liberal dream

team’ between French President Emmanuel Macron and Dutch Prime

Minister Mark Rutte for the upcoming 2019 elections to the European

Parliament. Comments in the media and by analysts highlighted the

potential for political realignment in Brussels after these elections should

Macron and Rutte be successful1, but equally pointed to their apparent

political differences on reforming the EU2. Indeed, despite their aspiration to

form a joint political group in parliament after these elections, Macron and

Rutte have been perceived to be at different ends of the spectrum on how to

‘fix’ the EU’s current problems. Despite the upcoming elections to the

European Parliament in 2019 and the related reshuffle of the European

Commission, most member state governments will stay in power and it is

them that will play the decisive role in any major EU reforms and therefore

their positions will drive the trajectory of the process. However, as German

Chancellor Angela Merkel will rescind leadership of her party while planning

to remain at the helm of the German government till the next elections in

2021,3 the most significant member state has become somewhat

unpredictable for the moment.

One popular journalistic distinction is that between ‘more’ or ‘less’ Europe, in

which Macron would fall into the ‘more Europe’ camp and Rutte in the ‘less

Europe’ one4. However, this has often proven to be a false dichotomy and a

generally vague and problematic distinction.5 Along the lines of another

frequently applied distinction, one can perceive Macron as one of the major

actors arguing for a ‘federalist’ vision for the future of the EU, in contrast to

the intergovernmentalism of Rutte.6 While being a somewhat sharper

distinction denoting not just the direction but also the preferred method of

European integration, we want to go a step further and apply a more precise

analytical device to map out their actual differences and potential overlaps.

For this purpose, we will try to compare the reform proposals spelled out by

Rutte and Macron over the course of roughly the past year through the lens

1 e.g. Bochev, Venelin (2018): The Macron-Rutte Pact: A New Hurdle for Western Balkan Enlargement,

European Policy Centre, 16.10.2108, https://cep.org.rs/en/blogs/the-macron-rutte-pact/ 2 e.g. Ottens, Nick (2018): Europe’s Liberal Dream Team Looks More Like a Marriage of Convenience,

Atlanitc Council, 11.10.2018, http://www.atlanticcouncil.org/blogs/new-atlanticist/europe-s-liberal-dream-

team-looks-more-like-a-marriage-of-convenience 3 Jenny Hill (2018): Angela Merkel to step down as German Chancellor in 2021, BBC News, 29.10.2018

https://www.bbc.com/news/world-europe-46020745 4 Eszter Zalan (2018): Dutch PM urges ‘less is more’ EU model, euobserver.com, 13.06.2018,

https://euobserver.com/political/142074 5 Arthur Boriello and Amandine Crespy (2018): Less or More Europe: The EU at a crossroads between

federalism and political disintegration, 14.01.2016, http://blogs.lse.ac.uk/europpblog/2016/01/14/less-and-

more-europe-the-eu-at-a-crossroads-between-federalism-and-political-disintegration/ 6 Ottens (2018)

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of market integration vs. the integration of core state powers, put forward by

Genschel and Jachtenfuchs.7 Furthermore, we use the same perspective to

put Rutte and Macron in the context of the current German and Polish

positions.

Perceiving EU reform through the ‘Core State Powers’ lens

The importance of analysing the Macron-Rutte alliance from the perspective

of ‘Core State Powers’ integration results from the particularities of the

current EU crises particular. Poland’s Prime Minister in his address to the

European Parliament on the future of the EU argued that it is the

accumulation of crises – Brexit, Eurozone, Migration, Russia – that

differentiates the current situation from previous regular EU crises,8 which

the EU regularly addressed by ‘muddling through’.9 In contrast, Genschel

and Jachtenfuchs offer a crucial qualitative differentiation and highlight that

the problem is not the number of affected policy areas but their nature:

‘[M]ost integration activities since the 1990s concern the integration of

core resources of sovereign government (money and fiscal policy, public

administration, diplomacy, military force, police power and border

control.’10

Unlike with previous crises, which related to issues of market integration,

the current problems of the European Union affect these areas of core state

power, which makes EU level responses urgent but inviable.11 There is high

demand for EU level solutions, but only a very limited supply of political

support for such measures due to the different degrees of exposure and

diverging problem analyses among member states.

While market integration has mostly benefitted all member states, albeit to

varying degrees, the integration of core state powers has resulted in zero sum

distributive conflicts between member states: not market actors but member

state governments have to pay adjustment costs and the burden is unevenly

distributed across the EU. Member states directly affected by the crises point

to systemic problems and thus refuse to foot the bill, instead calling for joint

solutions and burden-sharing. In contrast, member states not directly

affected refuse to subsidise affected countries, pointing to ‘homemade’

problems at the national level. Such distributional conflict cut across policy

areas and have been identified in both asylum policy and single currency

7 Philipp Genschel and Markus Jachtenfuchs (2018): From Market Integration to Core State Powers: The

Eurozone, the Refugee Crisis and Integration Theory, Journal of Common Market Studies 56(1), pp.178-

196 8 European Parliament (2018): Polish PM chooses to focus on economy, amid questions on rule of law in

Poland, European Parliament Press Release, 04.07.2018, http://www.europarl.europa.eu/news/en/headlines/

priorities/future/20180628IPR06806/polish-pm-chooses-to-focus-on-economy-amid-questions-on-rule-of-

law-in-poland 9 Thomas Klau (2011), The euro: Buying time and muddling through are no longer enough, ECFR

Commentary, 22.06.2011,

https://www.ecfr.eu/article/commentary_the_euro_buying_time_and_muddling_through_are_no_longer_en

ough 10 Genschel and Jachtenfuchs (2018): 179 11 Ibid.

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matters. Based on these different perspectives, two different approaches to

addressing existing problems have emerged: capacity building and re-

regulation. Those calling for burden-sharing seek the creation of EU-level

capacities (coercive, fiscal or administrative) for this purpose. Those stressing

individual policy failures seek to strengthen European regulation to force

policy reforms in affected member states and ensure compliance.12

Yet, there is a third possible approach. Due to the abovementioned difficulties

to implement solutions at the EU level, member states and the Commission

have employed a strategy of externalisation that enabled them to side-step

their internal disagreements. This means drawing on the capacities of

external actors to try to get a grip on the crises to prevent over-burdening any

side of the abovementioned internal EU divide.13

What we endeavour to do in the following is, in a first step, to map the EU

reform proposals previously put forward by Macron and Rutte in their major

speeches14 to establish in which policy areas they rely on capacity-building,

re-regulation or externalisation to establish where their visions might allow

for overlap and compromise and where they likely remain irreconcilable.

Analysing their approaches specifically through the lens of ‘Core State Power’

integration is crucial given that the key problems within the EU fall into this

area. Within this framework, Macron and Rutte also fall into two different

camps, but our ambition here is to establish more systematically where their

proposals in specific areas of EU policy fall between capacity-building, re-

regulating and externalising. This will enable us to assess specifically how

far their proposals are apart and where potential overlap lies which is

fundamental for their planned joint political project across the next European

Parliament, Commission and Council. Rutte’s proposals are also relevant

beyond the immediate participation in the planned liberal alliance. He can

also be seen as the spokesman of the fiscally conservative and integration-

cautious group of northern states, either known respectfully as the ‘New

Hanseatic League’15 or disparagingly as Mark Rutte and the ‘Seven

Dwarves’16.

In a second step, we seek to expand our scope to include the wider EU reform

debate to map the compatibility of their proposals with the most concretely

spelled out CEE vision, put forward by Polish Prime Minister Morawiecki,17

12 Ibid: 187 13 Ibid: 190 14 For the purposes of this paper, we are focussing on the Sorbonne speech and the Address to the European

Parliament delivered by President Macron on the 26th September 2017 and 17th April 2018 respectively. In

the case of Prime Minister Rutte, we consider his speech delivered at the Bertelsmann Stiftung on the 2nd

March 2018 and his Address to the European Parliament on the 13th June 2018. 15 Mehreen Khan (2018): The EU’s new Hanseatic League picks its next Brussels battle, Financial Times,

01.10.2018, https://www.ft.com/content/ca9dc2dc-c52a-11e8-bc21-54264d1c4647 16 Paul Taylor (2018): Brexit redraws EU alliances, Politico.eu, 20.04.2018,

https://www.politico.eu/article/brexit-redraws-eu-alliances-coalitions-stop-france-and-germany-deeper-

integration/ 17 While his proposal does not represent a joint vision of the Visegrad group, if his proposals could, at least

in parts, find common ground where Macron and Rutte overlap, this would provide substantial additional

weight to any such reform plan and potentially bring more Central and Eastern European countries on

board. This should not in any way imply that Morawiecki aligns himself politically with liberal integration

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as well as the German vision and the red lines spelled out by Chancellor

Merkel. This enables us to use the ‘Core state power’ framework to develop a

tentative stimulus-response scheme among major country leaders within this

debate. This will allow us to assess the potential for compromise and likely

deadlocks among leading member states. What we do not seek to do is to

assess the contents of the proposals and their appropriateness to address the

EU’s current malaise.

ideas, but in a second step Macron and Rutte would necessarily have to reach out to other member states

beyond their political family. There remain other political obstacles, not least the dispute over democratic

standards and rule of law, but it is nevertheless interesting to try an assessment where, politics aside,

compromises might lie, and overlaps might already exist.

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Approaches to solving ‘Core State Power’ integration Drawing on the definition of ‘Core State Powers’ above, we can set out the

scope of our investigation regarding relevant policy fields while cross-

referencing the central topics addressed in the key programmatic speeches.

The topics we are thus analysing below are the monetary policy, asylum

policy and defence policy. Despite the contrast between the market

integration and core state power integration, we will also include proposals

for the completion of the single market that would affect core state powers

and could thus lead to the same dilemmas as in the three abovementioned

areas.

Fiscal policy

The Euro and its future have been the main driving force behind the Rutte-

led group of Northern member states. Rutte’s proposals indeed strongly

exhibit this group’s penchant for re-regulative solutions. The first priority is:

‘Everyone should keep their house in order’.18 This particularly entails the

return of all member states to respecting the Maastricht criteria and

implementing structural reforms.

Furthermore, Rutte suggested to use structural funds ‘to support’ such

reforms.19 While this sounds similar to proposals made by the Juncker

commission as part of their post-2020 long-term budget (MFF) proposal,

there seems to be a notable difference in the implementation of such support

between Rutte and the Commission. The Commission proposed a new

instrument, the Reform Support Programme, consisting of 25 billion EUR to

sweeten structural reforms in and enhance economic cohesion among member

states.20 Rutte’s approach to EMU reform rather suggests the addition of

some form of coercive capacity to the existing structural and cohesion funds.

Dutch plans also involve EU-level institutions and the use of EU funds but as

a ‘last resort, not first aid’ as Rutte put it.21 This includes the support for

unifying all EU-level crisis mechanisms under the umbrella of a European

Monetary Fund (EMF). The EMF, in Rutte’s vision, shows the reluctance to

cede core state powers to the supranational level, however. It should be

intergovernmental and act only unanimously, while overseeing all aspects of

emergency programmes (negotiation, funding and supervision).

18 Government of the Netherlands (2018): Speech by the Prime Minister of the Netherlands, Mark Rutte, at

the Bertelsmann Stiftung, Berlin, 02.03.2018,

https://www.government.nl/documents/speeches/2018/03/02/speech-by-the-prime-minister-of-the-

netherlands-mark-rutte-at-the-bertelsmann-stiftung-berlin 19 European Parliament (2018): Debate with the Prime Minister of the Netherlands, Mark Rutte, on the

Future of Europe, Minutes of the debate, 13.06.2018,

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+CRE+20180613+ITEM-

006+DOC+XML+V0//EN&language=EN 20 European Commission (2018): Regulation of the European Parliament and of the Council on the

establishment of the Reform Support Programme, COM(2018) 391 final,

https://ec.europa.eu/commission/sites/beta-political/files/budget-may2018-reform-support-programme-

regulation_en.pdf 21 Government of the Netherlands (2018)

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The Franco-German Meseberg Declaration from June 2018, which supports

steps towards drawing up a common Eurozone budget with fiscal transfers,

underlined the raison d’ètre of the Dutch-led group. Originally, however,

President Macron presented even more ambitious goals in his Sorbonne

speech.22 While acknowledging the necessity of reforms at the member state

level, policy coordination and the compliance with existing rules, i.e. rather

re-regulative elements, the core of his proposals was an additional Eurozone

budget to support economic convergence and provide stabilisation in crisis

situations. From the point of view of core state power integration, Macron’s

Eurozone budget proposal is most significant in his plans to fund it directly

from EU level digital and ecological taxes, as well as potentially in the future

through a harmonised corporate income tax, under the political control of a

Eurozone ‘finance minister’ and oversight by the European Parliament. This

would constitute the development of substantial fiscal and administrative

capacities at the EU level.

The Meseberg Declaration then constituted a watering down of Macron’s

plans necessitated by the red lines of the German government. Chancellor

Merkel had spelled out some of these out in her long interview with the

conservative German daily Frankfurter Allgemeine Zeitung.23 The core of her

crisis proposals was the creation of a European Monetary Fund that would be

equipped with the same tools used by the IMF. While the creation of an EU

level institution that would tie emergency credits to structural reforms would

establish permanent coercive capacities at the EU level, Merkel strongly

emphasised the intergovernmental design of such an institution in a similar

vein to Dutch PM Rutte. Despite the envisioned role for the EMF to also

independently assess the health of member state economies and rule

compliance in cooperation with the Commission, the intergovernmental

nature would tilt the emphasis towards a re-regulative rather than capacity-

building approach. However, Merkel equally expressed support for French

proposals for a Eurozone budget, albeit in a more limited form as later

evidenced in the Meseberg Declaration. Merkel spoke in favour of an

investment budget, either within the overall EU budget or separate from it,

to support economic convergence and modernisation that would act even

outside crisis situations to address weaknesses and risks in member states.

However, this fund would act by providing additional investment sources in

contrast to the conditionality-based approach of the EMF. Notably, the

Meseberg Declaration mentions the ‘allocation of tax revenues’ in addition to

national contributions to the Eurozone budget, thus supporting the creation

of fiscal capacities. On the other hand, a dedicated Eurozone finance minister

has been dropped with the Commission foreseen administering funds.24

22 Government of France (2017): Initiative pour l’Europe: Une Europe souveraine, unie, démocratique,

26.09.2017, http://www.elysee.fr/declarations/article/initiative-pour-l-europe-discours-d-emmanuel-

macron-pour-une-europe-souveraine-unie-democratique/ 23 Frankfurter Allgemeine Zeitung (2018): Europa muss handlungsfähig sein - nach außen und

innen, 02.06.2018 24 France Diplomatie (2018): Meseberg Declaration Renewing Europe’s promises of security and

prosperity, 19.06.2018, https://www.diplomatie.gouv.fr/en/country-files/germany/events/article/europe-

franco-german-declaration-19-06-18

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Both President Macron’s Sorbonne speech as well as Commission President

Juncker’s 2017 State of the Union25 address expressed the goal to expand the

Eurozone to encompass all member states. However, most CEE governments

have so far been reluctant to undertake concrete steps towards the adoption

of the single currency. Therefore, it is not surprising that Poland’s Prime

Minister Morawiecki did not make any statements on the future of the Euro.

On the other hand, the official Polish line on Euro adoption is that Poland

might consider it, if the Eurozone has solved its problems and regained

stability.26 In this context, however, the Polish Prime Minister’s speeches in

the European Parliament or at the Körber Foundation in Berlin would have

been good opportunities to lay out the criteria and conditions under which

Poland would consider the Eurozone sufficiently ‘fixed’ as well as outline how

Poland would envisage a Eurozone it would consider joining. After all, the

non-Euro countries of Central and Eastern Europe have been concerned

about not being at the table at which major macroeconomic decisions with

significance for the whole of the EU will be taken, resulting in attempts to

obtain an observer status at Eurozone meetings.27 Given the strong interest

in Eurozone enlargement in Brussels, spelling out a Polish vision for an

acceptable Euro could have been a good way to insert the Central and

Eastern European non-Euro member states into these debates.

Asylum policy

The second main conflict over the integration of core state powers concerns

the EU’s approach to refugees and migration. The EU mostly avoided dealing

with the conflict by focussing on externalisation in the form of the fragile EU-

Turkey deal28 and the cooperation of the countries of the Western Balkan to

curb migration flows29. Yet, internal problems of EU asylum and migration

policies remain unaddressed with diverging approaches in the analysed

proposals.

French proposals to tackle the refugee crisis effectively mean the full

Europeanisation of border management and asylum policies. While the goal

of interconnected databases and harmonised asylum procedures could still be

achieved in a re-regulative approach, Macron’s plans for a European Asylum

Office and a European Border Police Force to manage the external border and

handle the return of rejected applicants creates substantially invasive

capacities at the EU level. Macron furthermore called for a ‘large scale 25 Vladimir Bartovic (2017): Juncker: the wind is back in Europe's sails, in: Commentary: State of the

Union Address 2017, EUROPEUM Institute for European Policy, 14.09.2017,

http://www.europeum.org/en/articles/detail/1564/commentary-state-of-the-union-address-2017 26 Lidia Kelly (2018): Poland to start debating euro zone membership only once bloc reformed – minister,

Reuters, 26.05.2017, https://www.reuters.com/article/us-cee-summit-poland-szymanski/poland-to-start-

debating-euro-zone-membership-only-once-bloc-reformed-minister-idUSKBN18M1ZA 27 Ruth Frankova (2017): Czechs seek to gain observer status at Eurozone meetings, Radio Praha,

29.08.2017, https://www.radio.cz/en/section/curraffrs/czechs-seek-to-gain-observer-status-at-eurozone-

meetings 28 Judy Dempsey (2017): Judy Asks: Is the EU-Turkey Refugee Deal on the Ropes? Judy Dempsey’s

Strategic Europe, Carnegie Europe, 26.07.2018, http://carnegieeurope.eu/strategiceurope/72634 29 Ivana Sekularac and Gabriela Baczynska (2018): EU woos Western Balkans but is coy on membership,

Reuters, 16.05.2015, https://www.reuters.com/article/us-eu-balkans/eu-woos-western-balkans-but-is-coy-

on-membership-idUSKCN1IH2ZE

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European programme to train and integrate refugees’, even though it is

unclear whether that would again result in the creation of capacities at the

EU level and could equally be addressed at the member state level through

re-regulation. Additionally, French proposals include a strengthening of EU-

Africa relations, which has been a staple of French European policy from the

very inception of the European project. Macron argued in his Sorbonne

speech that the Mediterranean and Africa more broadly should be the ‘first

priority’ of the EU’s external affairs. Thus, he follows in the footsteps of his

predecessor Nicolas Sarkozy, who inaugurated the Mediterranean Union as

the Southern component of the ENP. While Macron also reminded member

states to step up their efforts in the field of development assistance, in a

slight re-regulative nod, the core of his agenda lies in the creation of

substantial fiscal capacity at the EU level, in the form of a financial

transaction tax to be used to fund EU development cooperation initiatives,

including those aimed at ‘Mobility’ in partnership with African countries.30

The core of the Dutch approach to the refugee crisis is externalisation. Rutte

praised the EU-Turkey deal and spoke out in favour of creating further

arrangements of this kind with other transit countries, including reception

centres. Nevertheless, Rutte also expressed support for capacity-building

measures as he supported the expansion of Frontex to increase border

security. Highlighting the need for solidarity with Italy and Greece, Rutte

also voiced support for a redistribution mechanism (coercive capacity-

building). He presented this as only necessary temporarily, in times of crisis,

if borders are tightened and illegals are deported quickly.

Migration has been the main topic uniting the Visegrad Group during the

past two years, which ferociously resisted any attempts to relocate refugees

arriving in Southern member states.31 The development of any

administrative and coercive capacities at the EU level has thus been firmly

rejected by PM Morawiecki. Instead, the logic of bringing one’s own house in

order plays out here somewhat differently from the Dutch approach to the

Euro crisis. The Polish government maintains that the significant influx of

Ukrainian workers largely consists of people fleeing warfare in the Donbas,

but they fail to show up in statistics because Poland does not register them as

refugees but as foreign workers instead, even though such claims are

contested by experts.32 While Poland and the other V4 have strongly

advocated to reinforce Europe’s external borders, they have also refused the

development of further capacities for Frontex. Instead, they have advocated

that member states should oversee efforts tightening external borders. While

falling short of a proper re-regulative approach for lack of setting any firm

targets, this approach nevertheless explicitly reflects the zero-sum logic, as

30 Other main concerns for Macrons development cooperation initiatives would include youth

unemployment as well as climate change which are also closely tied to international migration. 31 Euractiv.com (2018): Visegrad nations united against mandatory relocation quotas, Euractiv.com,

23.07.2018, https://www.euractiv.com/section/justice-home-affairs/news/visegrad-nations-united-against-

mandatory-relocation-quotas/ 32 Frey Lindsay (2018): Ukrainian Immigrants Give The Polish Government An Out On Refugees, Forbes,

19.09.2018, https://www.forbes.com/sites/freylindsay/2018/09/19/ukrainian-immigrants-give-the-polish-

government-an-out-on-refugees/#3d6ab4574bb1

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the V4 fear more money for Frontex might come at the expense of smaller

cohesion funds for their infrastructure development, not to mention concerns

about national sovereignty.33 However, in line with the V4 mantra of

‘addressing the root causes’, Morawiecki expressed Polish support for several

new EU funding instruments aimed at reducing migration flows from Africa,

e.g. the Emergency Trust Fund, and announced Poland’s willingness to

contribute more in this area.

German proposals contain both capacity-building and externalisation

elements. First, Chancellor Merkel focussed on external border security with

far-reaching proposals to expand Frontex. In the short-term, Merkel

suggested largely re-regulative measures to prevent the erosion of the

Schengen system and freedom of movement: develop common standards for

the recognition of asylum claims, create unified procedures at the EU’s

external borders and improve the exchange of information between national

databases. In the long-term, the German government envisages the

transformation of Frontex into an EU border police fully in charge of the EU’s

external borders. This would be combined with an EU asylum office

responsible for processing all asylum claims at the external borders. Under

the assumption that secure borders would reduce member state objections to

receive refugees, Merkel stayed unclear regarding any mandatory relocation

mechanism as part of this proposed long-term solution, which could

constitute a significant coercive capacity in addition to the administrative

capacities that her proposals for the border police and asylum office would

entail. However, she seemed to embrace the Visegrad Group’s notion of

flexible solidarity by highlighting that each member state would need to

contribute to some of the elements of the EU’s response but not necessarily in

all of them. Furthermore, Merkel also proposed to maintain the current

externalisation strategy of cooperating with countries of transit in managing

migration flows. Additionally, Merkel also highlighted the importance of

reducing migration pressures though the improvement of economic conditions

in Africa though an equivalent of the Marshall Plan.

Defence policy

In contrast to fiscal policy and migration, the EU does not face an immediate

crisis in its modest defence and security policies. Nevertheless, both the

unpredictability of US President Trump and continued insecurity in Europe

caused by Russia are fuelling debates about a larger defence role for the EU.

Recurring discussions about an EU army have little substance in reality34,

especially since any such steps would require controversial treaty changes.35

Nevertheless, national security and defence lie at the core of core state

33 Euractiv.com (2018a): Poland, Czech Republic against EU border guard plan, Euractiv.com, 16.10.2018,

https://www.euractiv.com/section/future-eu/news/poland-czech-republic-against-eu-border-guard-plan/ 34 Judy Dempsey (2016): The Insincere Calls for a European Army, Judy Dempsey’s Strategic Europe,

Carnegie Europe, 06.09.2016, http://carnegieeurope.eu/strategiceurope/?fa=64483 35 European Political Strategy Centre (2017): Two Visions, One Direction: Plans for the Future of Europe

as laid out in President Juncker's State of the Union and President Macron's Initiative for Europe,

https://ec.europa.eu/epsc/sites/epsc/files/epsc_-_two_visions_one_direction_-

_plans_for_the_future_of_europe.pdf

Reconciling core state power integration with market regulation?

EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 13

powers and any substantial integration initiative could lead to similar

conflicts as in the case of the EMU and migration.

The French proposals for EU defence policy made in President Macron’s

Sorbonne speech rest mostly on the implementation of existing low-key

capacity building initiatives (European Defence Fund, PESCO) and the

creation of far-reaching additional capacities at the EU level in the form of a

‘common intervention force’ as well as a ‘common defence budget’. Also,

regarding intelligence cooperation, the French goal of ‘closer ties between

member state intelligence agencies’ is to be achieved through the creation of

a European Intelligence Agency, which, depending on its design, could result

in the creation of substantial administrative capacities at the EU level in a

core state power field.

On defence, Rutte did not offer much, as he clearly highlighted that NATO

comes first and that any EU initiative can only be complementary36. While

supporting joint defence projects within the PESCO framework to enhance

joint procurement, coordination and complementarity among member states,

in this field, too, the Dutch stance mostly favours proposals along the lines of

re-regulation. Exemplary of this is Rutte’s insistence on improving military

mobility within EU member states by cutting national red tape to allow

member state armed forces to be quickly deployed to aid one another when

needed. Thus, member states are to remain in charge and expected to meet

jointly agreed upon goals and targets.

Defence matters have traditionally ranked high on Poland’s political agenda,

independently of party politics. Morawiecki thus also emphasised defence and

security matters. He focussed primarily on member state responsibility for

providing appropriate defence capabilities and an adequate level of military

spending.37 Poland has been traditionally lukewarm towards major EU level

initiatives in this area which is reflected in this more re-regulative approach.

Nevertheless, Morawiecki expressed support for recently launched minimally

invasive capacity-building defence initiatives (PESCO and the European

Defence Fund), which he presented as opportunities to strengthen national

defence industries. Poland would undoubtedly hope to significantly profit in

this form. Additionally, Morawiecki highlighted the significant

vulnerabilities in cybersecurity, but his appeal for joint EU action in this area

did not specify whether he would seek a capacity-building or re-regulation

approach.

Merkel also endorsed PESCO to improve joint procurement and streamline

the diversity of European weapons systems.38 The unequivocal support of

PESCO is also an expression of the acknowledgement that any more far-

36 Government of the Netherlands (2018), op. cit. 37 European Parliament (2018a): Debate with the Prime Minister of Poland, Mateusz Morawiecki, on the

Future of Europe, Minutes of the debate, 04.07.2018

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+CRE+20180704+ITEM-

004+DOC+XML+V0//EN&language=EN 38 Frankfurter Allgemeine Zeitung (2018), op. cit.

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EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 14

reaching initiative developing more extensive EU-level capacities would

require controversial treaty changes and would thus be highly unlikely.

Showcasing traditional German reluctance towards military spending,

Merkel suggested using the new European Defence Fund to finance

operations of the intervention force proposed by President Macron. This

reluctance also extended to increasing efforts to increase member state

capabilities. Additionally, Merkel was the only one to refer to a different, but

closely related, area of core state powers: diplomacy. She highlighted the

necessity to react more quickly to foreign policy crises and suggested the

creation of an EU security council to streamline decision-making by

entrusting some aspects of foreign policy to a small rotating group of member

states in cooperation with the EEAS.

Single Market

Another key element of all proposals for the future direction of the EU

heavily emphasised the completion of the single market in various additional

parts of the economy. As we outlined above, market integration is a far less

contentious aspect of the EU project. It is thus not surprising that one can

point to far more overlap and consensus in this area. Nevertheless, the

completion of the single market might affect core state powers and thus also

shift the mode of integration to the more contentious variant. We will thus

also try to map out proposals made that would require new coercive, fiscal

and administrative capacities at the EU level.

While Rutte expressed his support for the completion of the single market in

the areas of services, energy and the digital economy. Concrete proposals

remained focussed mainly on traditional market integration aspects of the

single market, e.g. the deregulation of national rules on professions39. Macron

and Morawiecki also strongly emphasised the need to extend the single

market into further areas. However, they also strongly emphasised a social

dimension of the single market that extended into taxation matters.

Morawiecki pointed to his government’s efforts to combat abuses of the VAT

system, expressing his support for own income sources for the EU of which

VAT is one.40 However, he did not express any concrete proposals, instead his

appeal to follow Poland’s example on improving VAT collection falls not even

into re-regulative territory but was targeted at domestic audiences. French

proposals are more far-reaching. We already referred in the section on the

Eurozone to Macron’s plans for a carbon tax and a digital tax, which could

create fiscal capacities at the EU level. This stands in contrast to the existing

Commission proposal which points to income for national treasuries and thus

constitutes at attempt at re-regulation by providing common rules for the

EU-wide introduction of digital taxation.41 In another area, however, Macron

39 Government of the Netherlands (2018), op. cit. 40 European Parliament (2018a), op. cit. 41 European Commission (2018a): Proposal for a Council Directive laying down rules relating to the

corporate taxation of a significant digital presence, COM(2018) 147 final, 21.03.2018,

https://ec.europa.eu/taxation_customs/sites/taxation/files/proposal_significant_digital_presence_21032018_

en.pdf

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EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 15

also suggests re-regulative measures, as he proposed the introduction of a

‘corridor’ for CIT with the goal of harmonising tax rates across the EU.

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EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 16

Conclusions

The composition of the Council, i.e. the make-up of national governments and

their priorities, will be crucial for the future trajectory of EU reform. Of

course, the announcement of Chancellor Merkel to withdraw from the

leadership of the Christian Democratic Union is creating some degree of

uncertainty about the EU reform process. Germany’s role and position will

depend on how much damage Merkel’s authority as Chancellor will take after

leaving party leadership, who the new party leader will be. The most

substantial potential disturbance could emanate from CDU’s coalition

partner, the social democrats. Should they decide, amidst dismal poll ratings

and dissatisfaction with the coalition, to bring down the government,42 the

make-up of Germany’s leadership and its direction on EU reform would

become even more uncertain. Nevertheless, as it stands the situation appears

as follows.

In their Eurozone proposals, both Macron and Rutte refer to both re-

regulative as well as capacity building approaches, yet with a substantially

divergent emphasis. The line of the German government so far has been a

synthesis of Rutte’s and Macron’s concerns. Merkel supports both an

intergovernmental EMF as well as an additional investment budget for the

Eurozone including EU level taxes for its funding. While this combination

might open the way for a compromise between Rutte and Macron to ensure

that fiscal transfers are perceived as fair if coercive capacities balance

redistributive measures, there still remains the question if this could satisfy

a wider group of member states, particularly those more directly affected by

the crisis. Italy’s current conflict with the Commission regarding Rome’s

national budget highlights the limitations in this regard.

On migration there is largely consensus between Germany, France and the

Netherlands regarding the harmonisation of procedures with the goal of

creating additional capacities at the EU level. Yet, the Polish stance remains

reflective of the rejection of any coercive and administrative capacities to

automatically relocate refugees by the Visegrad Group. Despite agreeing on

the need for better border security, even here Poland is not supporting

additional capacities but rather a re-regulative approach to improve member

states’ own efforts to tighten borders. Ultimately, this leaves the continued

externalisation to transit countries and the Marshall Plan for Africa, which

can be at best a long-term solution. Thus, it is not surprising that this

approach is strongly supported by all four leaders, with the hope in Germany,

France and the Netherlands that thus the political controversy can be

reduced so far that compromise might become possible.

42 While it is doubtful whether the social democrats would risk new elections that could reduce them from

being the second largest party in parliament to potentially just the fourth, there is a possibility that

dissatisfaction with the state of the party might lead leaders and/or rank-and-file members to conclude that,

as they say in Germany: ‘Lieber ein Ende mit Schrecken als ein Schrecken ohne Ende’. (Better an end with

terror than terror without an end.)

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Regarding defence, ultimately the focus also lies on externalisation. Unlike

with migration, the reliance on NATO capacities is not fraught with the same

degree of risk. Thus, the demand for core state power integration is also very

limited. Thus, despite the strong rift between Rutte and Macron in this field,

conflict levels are rather low, and all four leaders seem thus content with the

low-key measures that are PESCO and the European Defence Fund.

Regarding Single Market policies, Rutte’s plans to further open cross-border

markets for services have faced a considerable degree of resistance in France

and Germany. Both fear a race to the bottom on wage competition

particularly by workers from CEE countries. This shows that the established

re-regulative mechanism does not necessarily bring consensus, especially

against the backdrop of existing protectionist sentiments on both the populist

left and right-wing. To avoid renewed, tiring battles on the extent of market

liberalisation, the introduction of a new EU capacity to tax digital champions

could serve to reconcile integrationist forces with EU citizens mindful of

social protection. Thus, intergovernmental solutions at a later point might

cause spill-overs equipping the supranational level with more core state

powers.

The need to address problems in the integration of core state powers is

evident in all visions. Yet, we still do not know in all aspects how far each

member state is willing to go and what course of action is preferable. It

remains clear, however, that the core crux of core state power integration

remains the zero-sum conflicts. There is no clear-cut capacity building view in

contrast to a re-regulation view. Each member state vision highlights the

individual vulnerabilities and proposed solutions are attempts to minimise

losses. Thus, a ‘grand bargain’ between state leaders providing a ‘one size fits

all’-solution is unlikely to happen. Externalisation remains popular to reduce

internal pressure, but it remains a very risky strategy that could at any time

fall apart and the EU would meet renewed crisis unprepared.

Despite their different point of views, Macron and Rutte running on a joint

ticket can be seen as an acknowledgement of the urgency of addressing the

integration of own core state powers. The debate however on how to resolve

existing pressures for integration affecting core state powers still needs to be

held.

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EU Frontier Policy Paper No. 15 – Center for European Neighborhood Studies 18

EU Frontiers – Policy Paper No. 15

November 2018 Łukasz A. Janulewicz and Robert Stüwe Reconciling core state power integration with market regulation? The potential of the Macron-Rutte alliance

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